Washington AS PRESIDENT (1789-1797)

The Nation's New Economy

Economic ProblemsAs the first secretary of the treasury, Alexander Hamilton faced the task of straightening out the nation’s finances. First of all, the new government needed to pay its war debts. During the Revolution, the United States had borrowed millions of dollars from France, the Netherlands, and Spain. Within the United States, merchants and other private citizens had loaned money to the government. State governments also had wartime debts to pay back.

By 1789, the national debt totaled more than $52 million. Most government leaders agreed that the nation must repay its debts to win the respect of both foreign nations and its own citizens. Hamilton saw that the new nation must assure other countries that it was responsible about money. These nations would do business with the United States if they saw that the country would pay its debts. If the nation failed to do so, no country would lend it money in the future. Hamilton came up with a financial plan that reflected his belief in a strong central government. He thought the power of the national government should be stronger than that of the state governments.

Hamilton also believed that government should encourage business and industry. He sought the support of the nation’s wealthy merchants and manufacturers. He thought that the nation’s prosperity depended on them. The government owed money to many of these rich men. By paying them back, Hamilton hoped to win their support for the new government.

Hamilton’s Financial PlanIn 1790, Hamilton presented his plan to Congress. He proposed three steps to improve the nation’s finances. 1. paying off all war debts 2. raising government revenues 3. creating a national bankHamilton wanted the federal government to pay off the war debts of the states. However, sectional differences (differences between the North and South) arose over repayment of state debts. Virginia, Georgia, and many other Southern states had already repaid their debts and did not like being asked to help Northern states pay theirs.

Hamilton asked Thomas Jefferson of Virginia to help him gain Southern support. They reached a compromise. In exchange for Southern support of the plan, Northerners agreed to place the new nation’s capital in the South. The location chosen was on the Potomac River between Virginia and Maryland. The secretary of the treasury favored tariffs. A tariff is a tax on imported goods. It serves two purposes: raising money for the government and encouraging the growth of American industry.

​ The government placed the highest tariffs on foreign goods—such as shoes and textiles—that Americans bought in great quantities. This ensured a steady flow of income to the government. In addition, since tariffs made foreign goods more expensive, they encouraged people to buy American goods. ​

Hamilton also called for the creation of a national bank. Such a bank would meet many needs. It would give the government a safe place to keep money. It would also make loans to businesses and government. Most important, it would issue bank notes—paper money that could be used as currency. Overall, Hamilton’s plan would strengthen the central government. However, this worried Jefferson and Madison.

How Banks WorkWhy did Hamilton want to create a national bank? He believed that such a bank could help the economy of the new nation. It would create a partnership between the federal government and American business.

Let’s say you deposited money into a bank account. Then you went back another day to withdraw some of the money. What happened in the meantime? Did the money just sit in the bank until you wanted it back? No—the bank used your money, and in doing so, helped fuel economic growth. In this way, money flows in a circular path from people like you into the general economy and back to you again. In the process, money can create goods and services, jobs, and profits, as the diagram explains.

The Whiskey Rebellion

During Washington’s Presidency, conflict arose over the government’s tax on whiskey, part of Hamilton’s financial plan. From Pennsylvania to Georgia, outraged farmers resisted the tax. For them, whiskey—and the grain it was made from—were important products.

Because of poor roads, backcountry farmers had trouble getting their grain to market. Crops such as wheat and rye were more easily carried to market in liquid form, so farmers made their grain into whiskey. A farmer’s horse could haul only two bushels of rye but could carry two barrels of rye whiskey. This was an amount equal to 24 bushels of the grain. In addition, their customers paid more for whiskey than grain. With little cash to buy goods, let alone pay the tax, farmers often traded whiskey for salt, sugar, and other goods. The farmers used whiskey as money to get whatever supplies they needed.

In the summer of 1794, a group of farmers in western Pennsylvania staged the Whiskey Rebellion against the tax. One armed group beat up a tax collector, coated him with tar and feathers, and stole his horse. Others threatened an armed attack on Pittsburgh.

Washington, urged on by Hamilton, was prepared to enforce the tax and crush the Whiskey Rebellion. They feared that not to act might undermine the new government and weaken its authority. Hamilton condemned the rebels for resisting the law.

A VOICE FROM THE PAST "Such a resistance is treason against society, against liberty, against everything that ought to be dear to a free, enlightened, and prudent people. To tolerate it were to abandon your most precious interests. Not to subdue it were to tolerate it." Alexander Hamilton, The Works of Alexander Hamilton

In October 1794, General Henry Lee, with Hamilton at his side, led an army of 13,000 soldiers into western Pennsylvania to put down the uprising. As news of the army’s approach spread, the rebels fled. After much effort, federal troops rounded up 20 barefoot, ragged prisoners. Washington had proved his point. He had shown that the government had the power and the will to enforce its laws.

WASHINGTON'S LEGACY

Washington Takes OfficeWashington had been elected to the office of the president in 1789. Each member of the Electoral College had written down two names. The top vote getter (by unanimous decision), Washington, became president. The runner-up, John Adams, became vice-president. Washington left Mount Vernon on April 16, 1789. He traveled north through Baltimore and Philadelphia to New York City, the nation’s capital at that time. On April 30 at Federal Hall, Washington was inaugurated, or sworn in, as president. John Adams of Massachusetts was his vice-president.

As the nation’s first president, Washington faced a difficult task. He knew that all eyes would be on him. His every action as president would set a precedent—an example that would become standard practice. People argued over what to call him. Some, including John Adams, suggested “His Excellency” or “His Highness.” Others argued that such titles would suggest that he was a king. The debate tied up Congress for a month. Finally, “Mr. President” was agreed upon.

Washington’s CabinetThe Constitution also gave Congress the task of creating departments to help the president lead the nation. The president had the power to appoint the heads of these departments, who were to assist the president with the many issues and problems he had to face. These heads of departments became his cabinet. The Congress created three departments.

In his first major task as president, Washington chose talented people to run them. For secretary of war, he picked Henry Knox, a trusted general during the Revolution. It was Knox’s job to oversee the nation’s defenses. For secretary of state, Washington chose Thomas Jefferson. He had been serving as U.S. minister to France. The State Department oversaw relations between the United States and other countries. Washington turned to the brilliant Alexander Hamilton to be the secretary of the treasury. Hamilton had to manage the government’s money. Hamilton’s ties to the president began during the war when he had served as one of Washington’s aides. To advise the government on legal matters, Washington picked Edmund Randolph as attorney general. These department heads and the attorney general made up Washington’s cabinet. The Constitution made no mention of a cabinet. However, Washington began the practice of calling his department heads together to advise him.

Washington RetiresIn 1796, President George Washington decided that two terms in office was enough. Washington believed two terms were the most any President should serve. For the next 130 years, Presidents followed this precedent by not seeking more than two terms. Washington had come to the presidency greatly admired by the American people. Throughout his eight years in office (1789–1797), he had tried to serve as a symbol of national unity. In large part, he succeeded.

Americans listened more closely to Washington’s parting advice onforeign policy--relations with the governments of other countries. He urged the nation’s leaders to remain neutral and “steer clear of permanent alliances with any portion of the foreign world.” He warned that agreements with foreign nations might work against U.S. interests. His advice served to guide U.S. foreign policy into the twentieth century.

PROCLAMATION OF NEUTRALITY

During Washington’s Presidency, war between France and Britain then broke out in 1793. Thomas Jefferson and his supporters continued to favor the French revolutionaries, while Alexander Hamilton, John Adams, and other Federalists favored the British.

The United States had won its independence largely through the military and financial support of France. Some French leaders thought it was time for the Americans to return the favor. Additionally, a treaty from 1778 still bound the two nations together. Hamilton and the Federalists, however, pointed out that Britain was the United States’ most important trade partner.

Hamilton and his supporters were able to persuade Washington that France’s war was totally European in nature and was not the United States’ problem. Washington finally became convinced that there was nothing to be gained if the United States involved itself in this European conflict. Compared to European powers, the United States was weak militarily. To avoid being drawn into the conflict, Washington adopted a policy of neutrality – the United States would avoid taking sides in any European conflict or becoming involved in any foreign war.

WASHINGTON'S FAREWELL ADDRESS

After two terms in office, Washington declined a third term. He especially disliked the new party rivalry. In 1796, Washington delivered his most famous “speech.” It was actually delivered in the form of a letter to the public published in the form of a speech.Washington used his Farewell Address to give his countrymen his advice as a “departing friend” on what he saw as the greatest threats to the nation’s survival. Washington addressed relations between the North and the South and the importance of moral virtue. He warned against the rise of political parties and the challenges of foreign policy.In his Farewell Address, Washington warned of possible dangers ahead:

“The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible. It is our true policy to steer clear of permanent alliances with any portion of the foreign world.”

“Let me now . . . warn you . . . against the [harmful] effects of the spirit of (political) party. . . . This spirit, unfortunately . . . exists in different shapes in all governments . . . but in those of the popular form, it is seen in its greatest rankness and is truly their worst enemy”. George Washington, Farewell Address

Cornell NotesEssential Question:What major economic, domestic, and foreign issues did President Washington face?

Note Questions:The New Nation's Economy1. Why was it important for the United States to pay off its war debt?2. What was Hamilton’s 3-step plan to pay off the nation’s debt?3. What benefit did the protective tariff give the American economy?4. Why did Hamilton think it was important to have a national bank?

The Whiskey Rebellion1. What did Washington’s actions in response to the Whiskey Rebellion show?2. What is the major difference between the Whiskey Rebellion and Shays’ Rebellion?

Washington's Legacy1. List the precedents that George Washington set for the presidency.

Proclamation of Neutrality1. Which American leaders supported the French?2. Which American leaders supported the British?3. Why did George Washington choose neutrality?Washington's Farewell Address1. What TWO warnings did Washington give to the people of the United States in his Farewell Address? 2. Is Washington’s Farewell Address about foreign or domestic policy? Explain.